Tim Hughes’s weekly newsletter, Dry Heat, summarizes the week’s latest activities and potential opportunities in the markets that he follows. His focus is primarily on the agricultural sector - cattle and grain futures. Contact Mr. Hughes at (602) 859-4100
Timothy Hughes email@example.com
6/21/13 General Comments
Cattle: Cattle on Feed on last Friday was bearish. On feed June 1st was 97% vs. 96.5% average guess, Placed in May 98% of year ago vs. 95.9% average guess and Marketed 97.9% vs. 97% average guess. The standout number was in placement weights which were heavy for the second month in a row, with a more than 100,000 head jump in the category of 800# and up compared to last year. Choice retail beef prices averaged $5.241/pound during May at grocery stores, which is down slightly (2.3 cents) compared to April, but is 27.6 cents higher than May of last year. All fresh beef averaged $4.877/pound in May compared to the record set in March at $5.30/pound. Beef prices may seem high to some people, but is actually at a three year low when compared with pork prices. Continued high cow and heifer slaughter, because of dry conditions, should begin to decline as range conditions improve. Last week’s cattle slaughter totaled 659,00 head, which is 2.3% higher than the previous week and .8% higher that year ago levels. Average steer dressed weights for the week ending June 8th was 853 pounds, 3 pounds higher than the previous week and 5 pounds higher than the same period a year ago. The last time steer dressed weights were below the same period a year ago was the week ending January 7, 2012. Year to date cattle slaughter is down 1.5%, but year to date beef production is down 1%. Cattle futures had been trading in a $3 range for 4 weeks until Friday. A close above or below the range in the August contract would indicate a $3 move in that direction for a technical trader. $118 – $120.67 was the range and Friday the close was $121.60 and should indicate a move to $123.60.
Grain: Forecasts for milder weather and good growing conditions turned the corn market lower Friday. Longer term charts of the corn futures don’t indicate a bottom. December corn has been in a big trading range between $5.11 and $5.736. The strong basis for nearby corn continues.
Crude Oil: “July crude is still in the middle of the range. I am waiting for a rally to the area just above $99 to sell.” That was the statement from my last comments on crude. We hit 99.21 on the August crude contract last Wednesday. The weekly contract shows how the band is narrowing and I believe the breakout will be down. Watch for test of $86.29 basis the August contract.
Gold & Silver: I still believe that the lead month of gold can hit $1150 and I wouldn’t consider buying for a long position until it hits that point.
Stock Index & Treasuries: If you have read this letter for a while, you know that I have been bearish the stock market and bonds in particular. This may come as a surprise, but I don’t believe that the Fed is going to give up QE anytime soon. The reactions to just such a hint of considering reducing QE will keep the Fed from acting “openly” near term. Be ready for a bounce in the bonds.
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